Yum! Brands suffering from Chinese food scandals

Fraud at
competitors

The American restaurant group Yum Brands! bought Little Sheep, the biggest chain for hotpot (Chinese fondue),
in 2011. However, the takeover cannot be called a success so far: sales and profit
contribution dropped last year and the first quarter of 2013 did not show any
signs of improvement.

In a
conference with analysts CEO David Novak admitted Yum Brands! is suffering from
the several Chinese food scandals. Despite the fact the chain buys its lamb at
two verified suppliers and that there have been no indications of fraud, the
market leader in hotpot is still suffering from the commotion when it was
discovered some suppliers mixed meat from rats, chickens, ducks and dogs in
their lamb. At least 11 tons of that meat was sold to chains such as Dai Mei,
Tan and Macao Doulao.

Higher
prices also unsuccessful

There is a second reason why Little Sheep is not faring well: Yum Brands! increased the
price of the chain from 70 to 90 yuan (from 9 to 11 euro), in an attempt to
change the image of the chain, towards a higher segment of the market.

Not only
Little Sheep is having troubles, KFC is also having its issues. The chain was
accused of administering antibiotics to chickens to increase their growth. The
bird flu also hasn’t helped, causing sales to drop by a quarter to a third in
the past few months.